Chip foundries, rattled last year by economic uncertainty and a weak spending environment, clamped down on capital spending directly hurting companies like Applied and competitors KLA-Tencor (KLAC.O) and Lam Research (LRCX.O).

That is changing now as chipmakers such as Intel Corp (INTC.O), AMD (AMD.N) and contract foundries such as TSMC (2330.TW) are seeing more demand amid rising sales of smartphones and tablets.

"A lot of leading chipmakers, especially the foundry customers are starting to spend pretty heavily again, after the slowdown," Morningstar analyst Andy NG said.

Applied Materials, the world's largest chip-fab equipment maker, expects earnings of 20 cents to 28 cents a share for the second quarter, outpacing the 15 cent a share expected by analysts, according to Thomson Reuters I/B/E/S.

"The mobility trend is driving growth and in the fourth calendar quarter smartphone unit sales surpassed PCs for the first time," Applied Materials Chief Executive Mike Splinter said.

"In semiconductor, 2012 is shaping up to be the year of the foundry."

The company, however, doesn't expect a rebound in its non-semi business -- which includes sales to solar cell makers and display technology makers -- that was hit by oversupply and weak pricing.

"Things are still bad there in terms of pricing and capacity. We can't really say if we would return to normal levels in the back half," Chief Financial Officer George Davis told Reuters.

Subsidy cuts in Europe earlier this year triggered a global glut of solar panels and drove down prices sharply, denting profits and stock prices at leading solar manufacturers.

Applied expects revenue to grow the first time in over a year. It forecast a second-quarter revenue growth of 5 percent to 15 percent from the first quarter. Its core silicon systems group -- the unit catering to chipmakers and foundries -- is expected to grow 15 percent to 25 percent.

Applied' s forecast implies second-quarter net sales of $2.30 billion to $2.53 billion, against analysts' consensus of $2.08 billion.

The company posted a first-quarter profit of $117 million, or 9 cents a share. Excluding items, it earned 18 cents a share.

Sales came in at $2.19 billion.

Analysts were looking for a 12 cent a share profit on $1.97 billion in revenue, according to Thomson Reuters I/B/E/S.

Applied's shares rose 6 percent to $13.95 in after-market trading. The stock has lost a fifth of its value in the last one year.

(Reporting by Himank Sharma in Bangalore; Editing by Don Sebastian, Unnikrishnan Nair)

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